A-1 Acid Ltd. (A-1) is engaged in the business of trading of high quality industrial acid and chemicals.
BUSINESS
The company offers a wide range of chemical products which finds variety of applications in the industrial sector like chemical, textile, steel, aluminium, pesticides, fertilizers, intermediates, defence, metals and petro refineries.
The company also provides transportation facilities to customers through owned fleet of tankers.
ISSUE
To part finance its working capital and general corpus fund needs, A-1 is coming out with a maiden IPO of 3000000 equity shares of Rs. 10 each with a fixed price of Rs. 60 per share to mobilize Rs. 18 cr.
Issue opens for subscription on 25.09.18 and will close on 01.10.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME.
Issue is solely lead managed by Guiness Corporate Advisors Pvt. Ltd. while Cameo Corporate Services Ltd. is the registrar to the issue.
Issue constitutes 30% of the post issue paid up capital of the company. Its entire equity is issued at par. It has also issued bonus shares in the ratio of 6 for 1 in December 2017.
The average cost of acquisition of shares by the promoters is Rs. 0.70 per share. Post issue, its current paid up equity capital of Rs. 7.00 cr. will stand enhanced to Rs. 10.00 cr.
PERFORMANCE
On the performance front, for last four fiscals, A-1 has posted turnover/net profits of Rs. 97.01 cr. / Rs. 0.13 cr. (FY15), Rs. 85.39 cr. / Rs. 0.92 cr. (FY16), Rs. 105.80 cr. / Rs. 3.00 cr. (FY17) and Rs. 96.17 cr. / Rs. 2.48 cr. (FY18).
With inconsistent top lines, it has surprisingly posted bumper profits for FY17 on higher top line of last four fiscals.
Issue is priced at a P/BV of 3.05 on the basis of its NAV of Rs. 19.69 as on 31.03.18 and at a P/BV of 1.87 on the basis of post issue NAV of Rs. 32.08. For last three fiscals, it has posted an average EPS of Rs. 3.42 and an average RoNW of 19.69%.
If we consider FY18 earnings and attribute it on fully diluted equity post issue, then the asking price is at a P/E of 24 plus. Thus issue is priced very aggressively.
On merchant banker’s front, this is 27th mandate from its stable in last three fiscals. Out of last 10 listings, one issue opened at discount and the rest with a premium ranging from 0.14% to 28.72%.
CONCLUSION
Issue is priced very aggressively discounting all near term positives. Inconsistent financial record of the company raises concern for future working. There is no harm in giving this issue a miss. (Avoid).
